Three significant changes are coming into effect from 6 April 2017 which will be of interest to many companies as follows:

Apprenticeship Levy

All businesses with a payroll over £3m will be obliged to pay a significant new tax, called The Apprentice Levy. It may come as a surprise to many businesses that there will be no distinction made between those who employ apprentices and those who don’t.

All businesses paying over £3m in annual salary will have to pay 0.5% of their annual salary bill with an initial £15,000 offset applied. This new taxation will start being collected through PAYE from 1 May 2017.Practically, this means, for example, that an employer of 250 employees with a payroll of £5m would pay £10,000 in annual levy payment after the £15,000 offset has been deducted.

The amount paid will be put into a digital account which employers can use in the form of digital vouchers to pay for training and assessments for apprentices. It should be noted that the levy cannot be used to help pay an apprentices salary. All employers who pay the levy will receive a 10% top-up from the Government to their monthly contributions. Connected companies can also pool their funds into a single levy. It is estimated that a business employing 1 new apprentice per month for 12 months at national living wage could save approximately £6,700 in apprenticeship training.

Smaller companies who do not have to pay the levy can still access the scheme. If they pay 10% of the costs of approved apprenticeship training Government will co-invest the remaining 90%.Similarly, any larger employer who wishes to spend more than the amount they pay in the Apprenticeship Levy can benefit from such co-invested Government funding.

Gender Pay Reporting (GPG)

This affects organisations with 250 or more employees. If you are in a group of companies with a total of 250+ employees but there not 250+ in any one individual company, you will not be subject to the GPG reporting duty at all. If, say, only one of your group companies has 250+ employees within it, then only that particular group company need publish the GPG report.

Qualifying organisations must publish the following gender pay gap statistics about their British employees:

•the mean and median overall gender pay gap figures for your organisation;

•the bonus pay gender pay gap for bonus payments over the preceding 12 months; and

•the number of men and women working across salary quartiles.

To help explain any pay gaps they may have, organisations will also be able to include additional narrative that provides context and sets out any actions the organisation intends taking. If the pay gap is particularly high then organisations may choose to provide more detail (i.e. broken down by hours and/or job grade) where this would help to present a more favourable picture.

The GPG report must be published on the employer's website every year and left there for at least three years. It must also be uploaded onto a special website which the Government will operate.

The deadline for publishing this report is 30 April 2018. You must then subsequently publish their latest GPG statistics every 12 months.

The Government intends to run periodic checks to assess for non-compliance, to produce tables by sector of employers’ pay gaps, to highlight employers who publish particularly full and explanatory information and to name and shame’ employers who fail to comply.

If you have 250+ employees but you haven’t already started to take action, it’s definitely time to start taking action now….

The Off Payroll Reforms

This legislation is still only in draft but it still seems likely that these reforms will come into effect on 6 April 2017.

In summary, where a contractor is working for a public sector end client via an intermediary and is inside IR35, tax and NI will now have to be deducted by the party paying the contractor as if the contractor were an employee. The contractor will therefore face the downside of being taxed as if they are an employee with none of the upside (e.g. security of tenure, redundancy pay, SMP, holiday pay etc.).

The changes apply to any end client who is defined as a public authority under the UK or Scottish Freedom of Information Acts. This is a wide definition and will cover e.g. universities, hospitals, local authorities, government bodies etc.

If you are not a public body then you may feel this will not impact you. However, the changes are already causing consternation in the public sector. There are already calls for rate rises by some contractors while others say they will no longer work in the public sector. There is also a possibility that these reforms may be rolled out to the private sector in the future. So even if you are not a public sector, it is useful for you to be aware of these changes and to keep an eye on them.

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